Q&A with DHL and UPS
From the Q4 Edition of The Executive Exchange MagazineThe Executive Exchange interviewed David Ng, Country Manager of DHL Indonesia, and Murali Krishnan, President of PT UPS Cardig International (UPS Indonesia), on issues impacting the logistics industry and their businesses.
The Executive Exchange: What primary categories of packages do you handle for domestic and international shipments in Indonesia? Where are most of your international shipments coming from and bound for?
David Ng (DHL): Our main business is in international air express shipments.
Under the DHL brand, however, there are three business entities: DHL Express, which is the business we are in, freight forwarding which is carried out by DHL Global Forwarding and supply chain which is handled by DHL Supply Chain.
Because of the high level of integration, we can ship anything from an envelope to a container and we can support these shipments with tailored/integrated logistics solutions.
Beyond being an international air express company, we see ourselves as a facilitator of trade by helping companies engage in and improve their trading activities across a broad spectrum of industries. Whether it is importing or exporting, we have extensive knowledge of and experience in the customs and excise regimes of more than 220 countries and territories and we put this to use to help our customers do business more efficiently and competitively.
For Indonesia, over 50 percent of our international shipments are originated/destined from/for Asia Pacific and the rest are to/from Europe and USA.
Murali Krishnan (UPS): In Indonesia, UPS handles just international shipments, either by Express (below 70 kg) or by Freight (over 70kg). We do not provide service for domestic shipments.
As an American company, the U.S. market is especially important for us in Indonesia, both for inbound and outbound shipments.
We have the advantage of a strong U.S. network, which is unmatched.
We also have a strong network in Asia that connects Indonesian businesses to their major trading partners. For example, we fly daily to Singapore, which has daily flights to India and also connections to our Intra-Asia hub in the Philippines.
EE: What technologies do you use to assist and expedite your Indonesia ground operations?
DN (DHL): As the leader in the industry, we are always trying to raise the bar in terms of making our operations more efficient and to a large extent; we rely on using technology to achieve this. In fact, we are often the pioneer in applying new technologies in the industry. For example, when mobile technology was launched, we were the first player to equip our couriers with mobile hand-held PDA units to record and send back details of shipment pickups.
We also have a wide range of web-based-services that make life easier for customers, such as opening an account, booking a shipment pickup and tracking their shipments.
Recently, we also deployed the Quality Shipment Monitoring System, or QSMS, at our Quality Control Center (QC) in SBP head office, and at our airport gateway. The QSMS is designed to proactively monitor the movement of every shipment door-to-door in real time. This helps to identify potential problems, and recommend corrective steps before the situation is magnified. By responding instantly to potential shipment delays, we save our customers precious money and time.
MK (UPS): Like all our operations around the world, our service providers (drivers) in Indonesia each carry a DIAD (Delivery Information Acquisition Device) which is designed specifically to help them be more efficient in their pick-ups and deliveries. Through the DIAD, the pick-up and delivery route of each service provider is planned. Pick-up and delivery information are stored in the DIAD for easy access.
Built into every DIAD is a barcode scanner and a digital signing pad. With every delivery, the service provider scans the package before the recipient signs on the digital signing pad as proof of delivery. This information is updated in UPS’s main system and available online for anyone with the tracking number of the package to check its status.
EE: Are you engaged in any public policy advocacy to improve the customs and regulations process? If so, for what issues?
DN (DHL): As a trade facilitator, we believe we have valuable insights and knowledge that can help in policy making. As such, we engage regularly with the relevant government agencies such as Angkasa Pura, which is the airport authority, and the Directorate General of Customs and Excise so that the industry’s needs are taken into consideration as part of the policy making process. For example, input from DHL helped in the implementation of a policy that made it possible for goods arriving at bonded areas to be cleared immediately instead of taking between two to four days in the past.
Apart from this, we also have a close working relationship with the Directorate General of Customs and Excise and collaborate with them to socialize changes in import/export regulations. In fact just this week we worked with Customs & Excise as well as the Ministry for Trade on a seminar to help Indonesian importers and exporters understand some of the new regulations introduced in the beginning of this year. We will also be holding a seminar in Batam next month to socialize the new Free Trade Zone regulations.
We are also a member of ASPERINDO (the local association of couriers) and various international chambers of commerce like AmCham. We use this forum to discuss problems, policies and for lobbying activities.
MK (UPS): UPS works closely with customs, regulatory bodies and the industry in various countries, including Indonesia to remove obstacles that will restrict or slow down trade. Some of the issues we focus on include:
- extended use of EDI (Electronic Data Interchange) and the reduction of paperwork in all major ports
- simplification of customs procedures and processes
- greater transparency including explicit regulations
- removal of weight and value restrictions on expeditious clearance of Express consignments
- adoption of modern risk management techniques to facilitate trade
DN (DHL): Any time there is a tightening of regulations, there will be some impact on both inbound and outbound shipments. At DHL, the key to minimizing this impact is to have a solid understanding of the prevailing regulations and their nuances. By having a full understanding, we are able to eliminate procedural and documentation errors, thereby saving time and money for our customers. As I explained before, the seminar that we conducted recently was to help our customers understand the requirements of the new regulations so that they are better prepared with the necessary documentations and permits to ensure hassle free clearance.
MK (UPS): There have been some delays. The new regulations require the consignee to provide more documents than previously needed and many are still unaware. We have to go back to the consignee to request for the documents before Customs clears the shipment.
With every new regulation, time has to be given to educate those affected. In this case, customs have held back the shipments due to the lack of importers’ documentation. These mainly affect those who are not regular importers and hence unaware of the new regulations. Over time, they will learn. At UPS, we will also work with our customers to remind them to ensure all documentations are complete in order to avoid unnecessary delays at Customs.
EE: How do you manage and improve your local gas and environmental efficiencies with your ground fleet, particularly with the high amount of idling time in Jakarta traffic?
DN (DHL): Being the leader in an industry that transports goods by land, air and sea, we recognize we have a responsibility to better manage and reduce the environmental impact of our operations. In fact, when it comes to fuel, water, power and resourced-based products, our mantra is “Reduce, Recycle and Reuse”.
In the area of fuel usage, we continually modernize our vehicle fleet so that we benefit from the latest fuel–efficient and more environmentally friendly models. We are already optimizing our courier transport routes based on forecasts of cargo volume and transport time to improve collection/delivery efficiency. Where possible, we eliminate the use of fuel-powered vehicles. For example, we recently introduced the DHL Push Bike program where our couriers use bicycles to collect and deliver shipments from customers in heavily congested areas such as Kota. By doing all of this, we are reducing the carbon footprint of our collection and delivery operations.
You may also have heard about our GoGreen Express service which helps customers to offset the environmental impact of the carbon emissions caused by transporting their shipments. The carbon emissions are calculated for each shipment and are offset against the carbon credit invested by DHL. A certificate will be provided to our customers to certify a carbon neutral express delivery.
MK (UPS): At UPS, route planning is an important aspect of gas and environmental efficiencies. The route of every UPS service provider is pre-planned and they will follow the same route every day.
There are a number of principles we used in route planning:
- No overlapping routes – Every UPS service provider is given a different route, and they do not overlap. They will cover the same routes everyday, and our customers will see the same friendly face everyday.
- Avoid Right Turns – In the U.S., UPS applies the “avoid left turns” rule. In Indonesia, we drive on left side of the road, so we avoid right turns, which help our service providers reduce idling time in their vehicles. With every right turn, you have to wait for the traffic light to turn green. You will also make a smaller arc turning right, then left, leading to very minor gas savings at each turn. In Jakarta traffic, you do not want to be stuck in a long queue waiting for your chance to turn green before you turn.
EE: Your businesses are, of course, very time sensitive. As such, what are the primary logistical bottlenecks in Indonesia (e.g. airport capacity, customs clearance, ground traffic) that concern your business the most going forward?
DN (DHL): I would say that the quality of the road infrastructure is probably the biggest challenge for us to meet our service obligations. For example, a shipment from Singapore to Jakarta takes only one and a half hours by air but it very often takes much longer to deliver the shipment to the consignee address. This “last mile” is always an issue because of poor road conditions and incessant traffic congestion throughout the main routes in particular in and around urban areas.
Besides road, there is also a need to improve relevant customs and trade regulations and related administrative procedures in order to ensure fast clearance of customs. Some of the regulations and procedures cause unnecessary delay, add costs and provide very little added value.
Having said that, we are happy to note that the government is implementing a national single window program, which will ultimately be integrated with the ASEAN single window program. This system creates a single window for the submissions and the applications of documents related to export and import procedures through the internet. This would be followed by synchronized processing of these documents by the related Government Agencies to produce a permit to export or import. The project is in the trial phase and is limited to certain ports and selected importers. We hope that it will be successfully rolled out to all major ports and include all importers.
MK (UPS): The Jakarta traffic has always been a challenge and that is why route planning is very important. We do not overlap, and the fastest way through this traffic is to avoid making right turns and be stuck behind long traffic queues.
With the new customs regulation that requires a consignee to provide more documents than previously needed, there have been some delays as many shippers are still unaware. Over time, as more are aware of the new regulation, we believe things will improve.
EE: What is your assessment of Indonesia’s airport operations in areas that affect you? (e.g. airport capacity, air controller skills, safety, airport ground logistics, airport management, aviation law)
DN (DHL): In general there are no major issues encountered with airport operations. We are pleased to note that the Government has recently invested in new airport facilities namely in Surabaya, Makassar, Timika and soon to be Medan new airport. However, I think it is time for a new cargo facility in Soekarno Hatta as the current facility is over crowded to cope with the increasing air cargo volumes.
MK (UPS): At the moment, UPS flies in and out of Halim Airport in Jakarta using a third party chartered carrier as well as utilising commercial carriers. We are not affected by airport operations directly.
EE: What types of contingency plans do you have operationally for airport delays/closures, road flooding, and social unrest to guarantee uninterrupted service and on-time performance?
DN (DHL): We have six airport gateways in Indonesia having direct flights to/from our hub in Singapore. They are Jakarta, Medan, Batam, Balikpapan, Denpasar and Surabaya. If any airports are shut down for whatever reasons, we can channel the urgent shipments to our remaining airport gateways.
MK (UPS): While we focus on providing the best service to our customers, from time to time, there could be service delays that are beyond our control. These are things that affect every carrier and not just UPS. Recent examples of these were the airport closure in Bangkok, the terrorist attack in Mumbai and the plane crash in Narita.
In such circumstances, our customers are understanding and know that these affect every carrier, not just UPS. We also provide updates to them and ensure their shipments remain a priority.
EE: How do you maintain standards at international levels with local staff, particularly those working in ground and port operations?
DN (DHL): In order to maintain standards at international levels we need the best people. We believe in attracting the best talents to our organization by striving to be an Employer of Choice (“EOC”). As an EOC, we will be able to attract and retain our talents who will give their best everyday.
A very important component of EOC is of course training. We therefore take training very seriously and we invest significantly to make sure that our staff are more than adequately trained and equipped with the right skills for the job they are doing. Some of these trainings are even conducted overseas.
Satisfying our customers is what counts. And this is why we focus all of our processes on the needs of our customers. This can be seen in internally driven initiatives such as our First Choice program which aims to establish DHL as our Customers’ First Choice by continuously improving our service quality. The tool we use to improve quality is DMAIC which is similar to Six Sigma. Almost all our managers and supervisors have been trained on DMAIC methodology.
I am happy to say that these efforts are already showing results in the form of awards that we have received such as the recent 2009 Customer Service Award for Service Excellence from the Center for Customer Satisfaction Loyalty, an award that we have received for four consecutive years.
MK (UPS): Consistency is the key to providing excellent service. At UPS, we have standard operating procedures that are used in all our operations around the world. Coupled with training, we provide the same level of quality service you expect from UPS, no matter which country you are in.
We also conduct regular audits to ensure process compliance, including training and annual certifications.
There are also clearly measurable KPIs to measure performance, which plays an important role in our ability to monitor, detect, and address areas where standards are not being met.
EE: What are unique challenges that you face in Indonesia logistically as compared to those in other non-hub ASEAN countries where you also operate?
DN (DHL): Indonesia logistics infrastructure is weaker than in Singapore, Malaysia and Thailand but ahead of Vietnam and Philippines. Some of the challenges are less efficient sea ports and air cargo facilities, poor road and rail network. We also need to streamline the relevant trade and customs regulations in order to speed up customs clearance and reduce import/export costs. Some of the regulations and procedures are adding more costs but very little value.
However, we note that the Government does recognize that our logistics capabilities are somewhat lacking behind other ASEAN countries and therefore has recently set up a National Logistic Team under the Coordinating Minister for Economic Affair to come up with a logistics blue print which includes the synchronization of laws and regulations. The draft blue print is ready but is still work in progress. It raises the issues but does not present a roadmap or plan of action, yet.
I hope this blue print will ultimately address most if not all the logistics challenges in Indonesia. Only by doing so will Indonesia be attractive enough for foreign investors to set up their production base here as oppose to Malaysia, Thailand or Singapore.
MK (UPS): The challenge for the global trading community today is the creeping trend towards protectionism in some form or other in a growing number of countries despite statements by their political leadership to the contrary.
The new regulations under Decree 56 have so far nominally impacted our volumes to Indonesia. UPS supports free trade and we are concerned that some of our customers are impacted by the additional regulatory controls, that the international trading community will face additional costs and that we will see a potential reduction in the supply chain velocity.
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David Ng is Country Manager of DHL Indonesia and its corporate member representative to AmCham Indonesia.
DHL is the global market leader in the logistics industry. DHL commits its expertise in international express, air and ocean freight, road and rail transportation, contract logistics and international mail services. DHL accepts its social responsibility by supporting climate protection, disaster management and education. For more info, visit www.dhl.com.
Murali Krishnan is President of PT UPS Cardig International and its corporate member representative to AmCham Indonesia.
PT UPS Cardig International (UCI) is a joint venture company between Cardig International and UPS. The company is well known as one of the express carrier and package delivery company. Every day UPS manage the flow of goods, funds and information in more than 200 countries and territories worldwide. For more info, visit www.ups.com.
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